Castle built of Sand: Saving the Euro or saving the nations which one comes first is the question of debate. European economies are struggling to survive the Euro and not the nations. They want bailout but to that extent to which the political image of financial management is not shattered keeping the upcoming elections in the Euro nations.
When Greece was bailed out last time various measures were decided to be implemented to for the coming years starting from 2011.After the first anniversary of collapse the conditions remains the same. In fact government representatives fooled the citizens and the world market by portraying false and lucrative and even reduced figures of Defaults. The whole share of the blame cannot be passed to European leaders but a part of it goes to financial media too. The financial media was buys in hiding the reason for collapse and were busy to design bailout plans rather than bringing the real truth.
The debacle of Europe was not created by European leaders alone. The political war of Euro and Dollar formulated the cool minded long term disaster planning by some US and European leaders. In my last article a year back I depicted the story.
The Lethargic Governments Deeds: Privatization
Today Greece is planning to go for real execution of stake sales in its public owned companies. . In other words it can be termed as Disinvestments. This debacle of today should not have risen if GREECE had acted in real terms towards the earlier privatization programme of 50 billion euros. Today the world markets are rattled due to lethargic government in Greece. Among these assets sales some prominent and lucrative ones are stakes in the telecoms firm OTE, state-owned Postbank and the ports of Athens and Thessaloniki. The Greek government controls a 74% stake in each of those companies. It’s quite hard to say about the quality of assets after the debacle of Euro but it will be a good long term bet to invest in these companies. The government now hopes to rise up to 5.5bn euros through asset sales by the end of 2011, up from an initial target of between 2bn euros and 4bn euros that it had been aiming for just a few weeks ago. But is quite very hard to say till now that how much real execution will be implied. Their is a strong protest among the citizens of these nations about disinvestments.Political rivals of the current government of these nations are intensifying the protest.
No other Revenue Earnings Avenues:
Greece is having no other way than going for a disinvestment since its other government revenue earning mechanism are already to much high as compared to any other nation. Payroll tax of Greece for employees stands at 28% and workers stands at 16% taking the total to 44% tax rate in Greece. Greece is having a VAT rate of 19%.Hernce any hike of rate from these levels will only create more problem on the long term recovery of consumption and GDP growth. One of the hardest fact is this that we all know that Greece is having a deficit number of 150% of the GDP where as in real terms it stands at 875% of the GDP.I did not write any thing wrong neither you read any thing wrong. Taking the pension liabilities and future unfunded other liabilities the deficits climbs to 875% of the GDP.
Small questions for readers:
Now 3 questions for my readers what the government representatives did to bring this debt and what they will do in future and where Greece stands. I will leave the answer for my readers to give.
I find the decision of not providing immediate funds to Greece for payment is an ideal step. IMF and ECB steps are realistic to reduce the fats of the Greece governments. IMF and ECB has made it clear that it will not release new funds or buyouts of bonds for Greece without a comprehensive European support package to cover future years. Easy money will only keep on flowing and debts will be climbing the hills of burden. No one is having any plan of how the funds will be paid back later on. Today US came up with so many Quantitative measures, flooded the streets with easy money but no mechanisms of recovery of the debt raised on its face. Infact the government and other financial heads of these economies get fever, thinking upon the recovery measures of easy money. Greece is having an unemployment rate of 21% followed with an average rate of around 24% in Euro nations.
Greece is not the last to fall or go for disinvestments’ will not be surprised to see a similar thing coming from US. And if they delay more easy money more assets bubbles and more speculators money in the bank accounts and end of the world in real terms. Infact the speed at which we are travelling towards financial disasters we may not have to wait till 2012.Moreover I find only one prominent buyer and investors moving around every street of every nation China.
Quality of Sale and Buy:
The biggest disinvestment with which the Greece will open up the doors is Balkans telecom giant OTE. stake sale. In June Greece will sell 16% stake of OTE. It has called up Germany’s Deutsche Telekom. The company currently controls 30% of OTE, the largest telecom operator in the Balkans which employs some 30,000 people in Albania, Bulgaria, Romania and Serbia. OTE this month reported a net profit of 30.2 million euros ($42.5 million) in the first quarter of the year, a fall of 54.1% from 2010. In February, OTE announced cost cuts worth some 32 million euros but managed to raise 500 million euros in a three-year bond sale. Hence as I repeat again quality of assets which will be displayed for sales needs more attentions.
Be ready for some cross border news of new deals. But gain all these deals will be financial leveraged deals rising further spread out collapse and erosion of capitals and savings of shareholders.
Very soon Italy’s government is planning to bring forward 35bn-40bn euros (£30bn-£35bn; $49bn-$56bn) of austerity measures to this June in response. So party is not yet over.Infcat EURO PRIVITIZATION begins…..

Indraneel Sen GuptaIndraneel Sen Gupta ([email protected] )

Global Macro Economic Researcher and Business Strategist

Master of Economics, MBA in International Business Management, ICWAI (Final)/CWM Final/Journalist

Read Other Articles of Indraneel Sen Gupta

Author Bio

Qualification: MBA
Company: IFAN Finserv Private Ltd.(SPA Group Company)
Location: mumbai, Maharashtra, IN
Member Since: 25 Sep 2019 | Total Posts: 130
God has been kind and the people with whom I have the journey of my career over the last 16 years have been great fortune to have them as my best friends standing today .Well, I hold more than 16 years of experience in the Financial Advisory, Global Macro Analysis and Business Development Strategy. View Full Profile

My Published Posts

More Under Finance

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

June 2021